Russia's Neighbors Scramble To Cope With Ruble's Tribulations

People in Moscow buy household appliances to take advantage of suddenly low prices on December 17.

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Russia's Neighbors Scramble To Cope With Ruble's Tribulations

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When the ruble sneezes -- and it has been sneezing plenty this week -- the former Soviet Union catches a cold.

Despite more than two decades of separation, the economies of the region remain deeply interconnected. Currencies throughout the region -- from the Moldovan leu to the Kazakh tenge have seen drops in value of between 10 and 20 percent this year. Governments are watching with concern as their exports become increasingly expensive for customers in their giant neighbor.

Here's how some of Russia's neighbors are reacting to the ruble's turbulence.

BELARUS

Belarus's economy is very closely intertwined with Russia's. Together with Kazakhstan, the three countries form a customs union free-trade area. About 45 percent of Belarus's exports go to Russia and much of the rest goes to other countries that are deeply linked to the Russian economy.

"For exporters in Belarus, this is a catastrophe," says Belarusian economist Andrey Suzdaltsau. "It is now practically impossible to sell their goods on the Russian market because of the new exchange rate for the ruble, this means the prices have risen such that no one is buying."

Suzdaltsau adds the Minsk could soon be forced to take measures to devalue its own currency. The Belarusian ruble has already lost some 13 percent of its value against the U.S. dollar this year.

Belarusian President Alyaksandr Lukashenka on December 18 tried to head off a devaluation by ordering the government to denominate trade with Russia in U.S. dollars or euros. "We should have long ago demanded Russia pay us also in hard currency," Lukashenka said.

Meanwhile, residents of regions along the border with Russia were enjoying at least a short-term boon. Exchange offices in Homel reported shortages of Russian rubles as locals prepared for shopping trips and bargain prices across the border in Russia.

Belarusians and Kazakhs are taking advantage of the sudden drop in prices.

"The crowds are amazing," a local driver named Uladzimer told RFE/RL. "People are buying everything, literally everything, from groceries to cars. Refrigerators, televisions, irons, coffee machines -- everything there is. Both Russian and Chinese. The prices are much lower than what we have in Belarus."

Ironically, even some Belarusian-made products can now be purchased more cheaply in Russia than they can at home.

KAZAKHSTAN

A similar situation can be found in the third customs-union member, Kazakhstan.

Long lines of cars were seen crossing the border at various points on December 17 as Kazakhs rushed to take advantage of the crashing ruble before retailers could raise their prices.

"My son-in-law and I went specially to Omsk to buy cars," Kazakh citizen Nadezhda Vorobyova was quoted as telling Interfax. "We both bought 2008 Fords for $6,000 each."

Because of the declining ruble, she says the cars cost between 30 and 50 percent less than just a few weeks ago.

Over the longer term, however, Kazakhstan faces the same problem as Belarus -- its goods are becoming more expensive to customers in Russia and other countries of the Commonwealth of Independent States. At the same time, more affordable Russian goods will make it hard for domestic producers -- industrial and agricultural -- to compete at home, particularly since the customs-union borders are completely open.

Kazakhstan, which like Russia is also an oil exporter and has been hit by low global energy prices, already devalued its currency by 19 percent compared to the dollar in February. But a further devaluation in 2015 is not out of the question.

Such issues, and the fact that neither Belarus nor Kazakhstan have joined with Russia in implementing sanctions against European Union food products, mean that the coming year will be a serious test for the Eurasian Economic Union, which will replace the customs union as of January 1 and will include Armenia and Kyrgyzstan as well.

GEORGIA

Since the 2008 war between Russia and Georgia, the economies of the two countries have been increasingly uncoupled. However, Russia did recently end its embargo of Georgian wines and mineral waters, meaning that those sectors will be affected by the ruble decline. But they diversified significantly during the years of Moscow's boycott and are much less dependent on Russia than they were before.

Georgia, however, is one of several former Soviet countries that counts on remittances sent back by citizens working in Russia.

"The biggest problem for Russia's neighbors is remittances," says economist Roman Gotsiridze, chairman of the Center for Economic Development and a former president of the National Bank of Georgia. "Georgia, Armenia, Azerbaijan are affected by this because they have many citizens working in Russia. In November, remittances [to Georgia] decreased by $20 million, after a $16 million decrease in October."

WATCH: In the Tajik village of Eloki, marriages are being canceled and houses left half-built as remittances from migrant laborers dry up. Nearly every family has been affected -- this is one family’s story.

Overall, Gotsiridze expects that increased remittances from Georgians in Italy and Greece will balance the decreases from Russia. But that is small consolation for those with relatives earning rubles.

"Those who are dependent on people working in Russia and sending money back to Georgia are suffering a lot," he concludes.

MOLDOVA

Moldova is one of the poorest countries in Europe, and it relies heavily on remittances from the several hundred thousand Moldovan citizens working in Russia.

Most Moldovans convert the rubles they earn into dollars or euros before sending them back to their families, meaning that the declining exchange rate is hitting them immediately.

"I have lost half [my savings] already," Zinaida Tiganescu, a resident of Balti who works in the construction sector in Moscow, tells RFE/RL. "My salary is not going up and everything here [in Russia] is more expensive. But we stay because we do not have any other choice. Here at least we can find work. In Moldova, if I went back at my age, I will not find anything."

Tiganescu says she is refraining from changing her rubles, hoping the rate will get better after the New Year's holidays.

Economists at the Expert-Grup think tank in Chisinau said on December 17 that remittances from Russia will fall by at least 20 percent this year. The knock-on effects of that -- reduced consumption, reduced tax revenues, etc. -- could mean a contraction of GDP by 3 or 4 percent.

Andrei Sochirca is a Moldovan who works in Novosibirsk. He says many of the people for whom he does reconstruction work have dollar-denominated mortgages and are already struggling to make payments. He describes the situation as "a catastrophe."

"It is likely that all Moldovans will have to pack their bags and go home," he says.

Compiled by Robert Coalson on the basis of reporting by RFE/RL's broadcast services

RFE/RL journalists report the news in 26 languages in 22 countries where a free press is banned by the government or not fully established. We provide what many people cannot get locally: uncensored news, responsible discussion, and open debate.